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=====Business Structures, Objectives and External Influences
Specimen Paper Unit 1
Answer all the questions

1. Southern Foods plc is a large company with interests in food processing and the retail
trade. Its directors are devising a new mission statement based on a draft submitted
by the company’s managing director. In its current mission statement the company
seeks “honourably to serve the needs of the community by providing products and
services of superior quality at a fair price to all our customers.” The draft of the new
mission statement includes references to environmental concerns and to stakeholders
other than customers.
(a) Explain what is meant by a mission statement. 2 marks
(b) Suggest reasons why the directors might be considering a reference to

environmental concerns in its revised mission statement.
5 marks
(c) Suggest and justify amendments to the mission statement which might refer to
a stakeholder other than a customer. 9 marks
(d) Suggest problems of motivation which might arise for assembly line workers
employed in the food processing division of this firm. Evaluate methods of
maintaining and improving motivation.
10 marks
Total 26 marks
2. A manufacturer discovers that the demand for its well known chocolate bar varies
with price as shown in the schedule below:
Price in pence Quantity demanded in million bars per year
35 50
34 52
33 54
32 56
31 58
30 60
29 62
28 64
27 66
26 68
25 70
(a) Calculate and comment upon the price-elasticity of demand when price rises
from 30p to 32p. 2 marks
(b) Assess the possible effects on the firm of a rise in the price of a product which
is a close substitute and evaluate the responses which the firm might make.
9 marks
5
(c) Assess the possible effects on the firm of a sharp rise in consumers’ disposable
income. 6 marks
(d) Analyse the effects of a vigorous ‘healthy eating’ campaign by the

government upon this firm and evaluate possible responses the firm might
make. 11 marks
Total 28 marks
3. Fizzy Drinks plc produces a range of six soft drinks at five different plants throughout
the U.K. Two of the products are well-established; the other four have been
introduced within the last four years. Two of these new products have produced
disappointing results. The Marketing Manager has complained to the Managing
Director that the Operations Department, one of whose departments is Research and
Development, have not responded to a series of memos outlining consumer
dissatisfaction with these products. The Operations Manager has responded that his
department is fully stretched trying to co-ordinate production on five different sites.
The board of directors has commissioned a firm of management consultants to advise

them on the possible restructuring of the organisation of the company. The
preliminary report of the management consultants stated that the span of control
seems too narrow.
Here is the current organisational chart of Fizzydrinks plc.
Managing Director
Personnel Marketing Finance Operations

Manager Manager Manager Manager
6
(a) Analyse the problems, resulting from a narrow span of control, which could be
created for large-scale manufacturing firms like Fizzydrinks.
8 marks
(b) State possible reasons why there is conflict between the Marketing and Operations
Manager and evaluate possible solutions for this problem. 10 marks
(c) Discuss alternative structures which a firm producing a range of soft drinks on
several sites might introduce and recommend what you consider to be the most
appropriate structure. 8 marks
Total 26 marks
7
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8
Marketing and Production
Edexcel Foundation is a Registered Charity

Harry Ramsden’s plc is no mere fish and chip shop. There are 36 restaurants where fresh fish
is served in an atmosphere created with glass chandeliers and by smartly dressed staff. The
chain has created a distinct theme. More outlets have been franchised for overseas operations
as far afield as Australia, Hong Kong and Saudi Arabia. Harry Ramsden’s has become an
international brand name.
However, losses of £1.9 million in 1998-1999 have forced management to re-think the
marketing strategy. The firm, established over 50 years ago, is now operating in an industry
where themed restaurants such as Planet Hollywood and Hard Rock Café are common and
the competition is getting fiercer. Despite the growth in the market (see Table 1) Harry
Ramsden’s has failed to maintain its market share. Chairman John Barnes has been quoted as
believing the future is in the opening of small scale restaurants rather than the large 200
seater establishments favoured in the past.
Table 1
UK expenditure on eating out Fast food sales
£billion
1997 22.6 6.0
1998 23.6 6.4
2004 forecast 31.0 8.4
Producing the right meal at the right time in the right place is a critical factor in achieving
success in fast food chains. With the rising costs of raw materials, their short shelf life and
the pattern of daily and weekly sales batch, production is the preferred method. The
development of a large number of small scale units to be supplied by the logistics section of
Harry Ramsden’s will mean a sophisticated stock control system, particularly as costs per
meal are likely to rise.
Model stock control graph for small unit restaurant

‘oo 8
UNITS
6 Re-order Level
2 Buffer Stock
M T W Th F S S M
Days of the Week
Source: Adapted from the Financial Mail on Sunday
9
Answer all the questions:
1. Assess TWO benefits a franchise operator receives from using the brand name
of Harry Ramsden’s. 16 marks
2. Assess the ways in which an understanding of price elasticity of demand could

determine the pricing policy of Harry Ramsden’s for both takeaway food and
restaurant meals. 20 marks
3. Suggest TWO promotional techniques Harry Ramsden’s could use to create

awareness of the new outlets. Analyse the factors which will determine the success of
these techniques 20 marks
4. Using the stock control graph shown state:
(a)(i) the re-order quantity; 2 marks
(ii) the weekly usage quantity; 2 marks
(iii) the number of orders each week. 2 marks
(b) Evaluate the factors which would influence Harry Ramsden’s when deciding upon the
buffer stock level and the reorder quantity 20 marks
5. Assess why the average cost of a meal might be higher at one of Harry Ramsden’s
smaller restaurants and lower in a larger restaurant 18 marks
6. Evaluate the case for and against adopting a Just In Time approach to stock holding in
the fast food industry. 20 marks
10
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11
Financial Management

1. (a) Courtmills Ltd makes sports clothing. One product line is sports sweaters which it
sells to retailers at £20 each. The firm’s projected output is 80 000 units a year
although it has the capacity to make 100 000. The figures below show the relevant
costs for the sweaters.
Overhead costs £300 000

Labour cost/unit £2
Material cost/unit £8
Other variable costs £2
Showing your working in full calculate:
(i) the contribution of each sweater sold 2 marks
(ii) the break even level of output in respect of quantity and

revenue 4 marks
(iii) the margin of safety at the proposed level of output 2 marks
(iv) the standard cost of each sweater at the proposed level of output 4 marks
(b) Courtmills Ltd has been approached by a high street retail chain with an order for
20 000 sweaters at £13 each. The sweaters would be produced under an own brand
label and would require the purchase of a new machine costing £20 000.
Assessing the numerical and non-numerical factors together what advice would you
give to Courtmills Limited in accepting or rejecting the order
20 marks
(c) Below is an extract from the profit and loss account and balance sheet of Courtmills Ltd
for 1998. Some items have not been calculated yet.
£million £million
Sales revenue 1.4 Fixed assets 2.5
Cost of sales 0.58 Current assets 0.7
Gross profit Less current liabilities 0.3
Less expenses 0.65 Net assets
Net profit Long term liabilities 1.6
Shareholders funds 1.3
Capital employed
12
Showing your workings in full, calculate the:
(i) gross profit margin; 2 marks

(ii) net profit margin; 2 marks
(iii) return on capital employed . 2 marks
(d) Calculate and comment on the firms:
(i) current ratio; 4 marks

(ii) gearing ratio. 4 marks
Total 46 marks
2. (a) Hilights Ltd makes soft toys for a number of chain stores. The most expensive pieces
of production equipment are the two cutting and sewing machines that are computer
aided. Each machine costs £70 000 and is expected to have a working life of
five years. The company accountant expects to sell the machines at the end of their
useful lives for about £3 500 each.
Assess how the use of an alternative method of depreciation would affect the
company’s reported profits. 12 marks
(b) In August the company accountant prepares a cash flow forecast. Most sales are
on credit terms. The chart below shows a summary of the cash flow for Hilights Ltd.
Month Sept Oct Nov Dec Jan Feb Mar Apr

£000 £000 £000 £000 £000 £000 £000 £000
Opening Balance 10 (21) (96) (252) (335)
Sales receipts 18 15 37 92 225 178 24 20
Expenses;
Purchases 14 20 45 50 8 8 8 10
Wages 15 45 120 90 17 12 18 17
Overheads 20 25 28 35 25 20 20 20
Balance (21) (96) (252) (335)
(i) Use the information above to calculate the projected cash balance of Hilights Limited
at the end of January and February
2 marks
(ii) Evaluate the ways in which a business such as Highlights Limited could overcome its
cash flow problems.
20 marks
Total 34 marks
13
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14
Analysis And Decision Making

1 Ransom Ltd is a manufacturer of fashion garments. It is considering investing in a new

machine. The cost of this will be £180 000 and the machine is expected to have a lifespan of
4 years and a scrap value of £20 000.
The projected net cash flows are given below:
Year £000
0 -180
1 40
2 70
3 120
4 50
The cost of capital is estimated to be 10%. The 10% discount factors are as follows:
Year 1: 0.91 Year 2: 0.83 Year 3: 0.75 Year 4: 0.68 Year 5: 0.62
(a) Evaluate the relevant numerical and non numerical factors Ransom Ltd
should consider and recommend whether it should invest in the new machine.
18 marks
(b) The rapid changes in the fashion industry have convinced Ransom Ltd of the
importance of the need to add more value to its products and to reduce the
development time for new products and the manufacturing time.
(i) Assess how the use of information technology can reduce product
development time 4 marks
(ii) Evaluate different ways of adding value to fashion clothes. 10 marks
(c) In the past, Ransom Ltd has experienced industrial disputes that have made it
difficult for it to complete all the orders on time. Assess the role of unions in the
workplace today and the strategies used by businesses to resolve industrial
disputes. 16 marks
Total 48 marks
15
2. A building project consists of a number of distinct activities (A to I) as shown in
the table and network diagram below.
C G
A D I
B H
E
Activity Duration in days Labour requirements
A 1 4
B 3 6
C 5 4
D 2 3
E 3 6
F 4 6
G 4 5
H 2 4
I 2 9
(a)(i) What is the earliest starting date for each of activities C, H and I? 3 marks
(ii) What is the latest finishing time for each of the activities D, E and H? 3 marks
(b) Identify and calculate the duration of the critical path for this network 3 marks
(c)(i) Explain what is meant by the term total float? 2 marks

(ii) Calculate the float times that exist on each activity. 3 marks
16
d) On a previous project the same firm prepared a Gantt chart, as shown below, to
identify ways of making effective use of sub-contractors and other outside firms.
Gantt chart for building 2 new houses

Week
Task 1 2 3 4 5 6 7 8 9 10 11 12
Clear site ñ
Prepare foundations ñ ñ
Lay drains and power cables ñ ñ
Erect buildings ñ ñ ñ ñ ñ ñ
Paint exteriors woodwork ñ ñ ñ
Install electrics and plumbing ñ ñ
Decorate interiors ñ ñ
landscape gardens ñ ñ
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remove all unwanted materials
Evaluate the issues which this Gantt chart raises for the firm with particular reference
to the effective use of sub-contractors
18 marks
Total 32 marks
17
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18
Business Planning
Specimen Paper Unit 5 (Alternative to Coursework)
You are advised to spend at least 15 minutes reading time
Stratford Paint Pigments Limited is part of a multinational corporation, PIP plc, that
manufactures a large range of paints for industry and household use. Stratford Paint
Pigments Limited was founded in 1936 by the two Stratford brothers who built the factory in
a small village. It produces a wide variety of paint pigments that form the basis for creating
colours in paint and these are sold to the parent company.
Over the years the firm expanded, although in a haphazard way, with the site split by a public
road. In 1970 the firm installed new production lines, which are now due for replacement.
The problems for many villagers is a combination of heavy traffic flows caused by delivery
lorries and the levels of dust pollution caused by the manufacturing and storage process. In
the last three years the firm has been fined twice for discharging untreated waste into the
local river, on both occasions it was the result of old equipment failing to work correctly.
The village has a population of 450 residents, 30 of whom are employed at the factory and
many of these have worked there for more than 20 years. There are few other local
employment opportunities. Public transport is poor but the village is well served by a small
Post Office and shop and a popular public house.
In recent months the parent company has been considering closing Stratford Paint Pigments
Limited. Rising distribution costs, new legislation concerning pollution levels and changes in
the use of traditional paints have made its continued existence as part of the company’s
portfolio less attractive. Three options have been considered as an alternative to closure.
These include:
Option A relocating the plant and the core employees to an established industrial zone
100 miles away on which PIP plc already has a factory.
Option B negotiating a management buyout for the business by two of the directors of
Stratford Paint Pigments Limited.
Option C demolishing the present plant and building a new factory which will
manufacture a new range of household paints for use by home decorators.
The following information may be of use to you in answering the questions.
19
Appendix A
UK RETAIL SALES UK HOUSEHOLD EXPENDITURE:

VOLUME INDEX: Indices at constant prices
Indices at constant prices 1971 index = 100
1989 92.3 Year Household Housing
1990 93.0 goods (includes (excludes home
1991 91.7 home improvement)
1992 92.4 improvement)
1993 95.2
1994 98.7 1981 138 121
1995 100.0
1996 103.1 1991 227 140
1997 108.6
1998 111.9 1992 293 150
Appendix B
SSP Profits 1993 - 99
SSP Rrofits 1993-1999
200 200
180 180
160 160
140 140
120 120
Employees
100 100
Profits
80 80
60 60
40 40
20 20
0 0
1993 1994 1995 1996 1997 1998 1999
Year
Nature of work undertaken by employees at Stratford Paint Pigments Limited.
20
=====================================
Appendix C
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Appendix D
Memo from Finance director to Chairman of PIP plc
Estimate costs of demolishing the present factory and building a new one to produce the new range of
paints is £5 million. This should lead to a net cash inflow of £625,000 p.a for 10 years.
Estimated costs of relocation to the site PIP plc already own is £700,000 and this should lead to a net
cash inflow of £100,000 for ten years.
If the site is sold for £1 million we could expect a return of 6% a year on this in the money markets.
The two directors at Stratford Paint tell me that they can raise the £1 million using a combination of
bank loans and personal savings, I understand they have the backing of another local business person, if
they need it, who doesn’t want to see the plant shut down. I am sure their bid is serious and should be
considered in the options available to us.
Memo from Personnel Director to Chairman of PIP plc
I have contacted our accountants and they have given me some food for thought about the proposed
plant to shut the Stratford plant and move the core staff over to our east coast factory. They believe
there are two sets of significant factors to consider. The qualitative ones are:
availability of schools for staff families

the quality of life in the area
job prospects in the area
Also they have done some calculations on the likely financial costs these are to cover:
redundancy payments
disruption to production caused by the move
need for staff training and familiarisation
removal of IT systems
wage salary adjustments
The final cost will be about £700,000
Memo from Marketing Director to Chairman of PIP plc
I have been thinking about the proposals to move some of the staff up to our east coast plant to raise
production of the present paint range. Given the level of competition from our overseas competitors and
the continuing strength of the pound I do not think we can increase sales to Europe any further. The
attraction of a new range of paints for the “Do it yourself” market is that this is a real growth area at the
moment. All these recent TV programmes promoting home decoration should be a real boost for us in
the next two to three years. It would appear to be a good idea for us to try and move into this market as
soon as possible.
22
Answer the following question:
With reference to the given data and other relevant information you would wish to include,
evaluate the three options (A, B, C) available to PIP plc. Write a report to the company
recommending a suitable course of action.
Total 80 marks
23
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Business Planning
Specimen Paper Unit 5 (Coursework Option)

Edexcel will prescribe annually two assignment questions relating to Business Studies, from
which candidates taking the coursework option select ONE to be undertaken and submitted
by 1 May. It is expected that the Coursework Assignment will be word-processed.
It should be noted that candidates not taking the coursework option in unit 5 will be required
to take a Written Paper which will be a 1½ hour paper based on an unseen case study set by
Edexcel.
Aims
Candidates will be involved in the process of primary research and data collection. The
assignment will provide opportunities for candidates to collect and collate both primary and
secondary information in a variety of ways. Candidates will be required to analyse and
evaluate the information, including making judgements and drawing conclusions. Their
findings should be presented in an appropriate form. It should encourage candidates to:
(a) investigate specific business activities through individual studies;
(b) collect, select and use business information in ways which are appropriate to
the prescribed assignment;
(c) demonstrate awareness of a variety of solutions to business problems and the

need to make reasoned statements and to communicate these effectively;
(d) enhance underpinning knowledge.
25
Assessment and Moderation of Coursework Assignments
The Coursework Assignment will be assessed by the candidate’s teacher, according to the
criteria given below, and will be externally moderated by Edexcel.
Sampling will be undertaken by post. A sample of candidates’ work will be requested from
each centre. Additional samples may be called for where necessary.
All candidates’ marks, together with completed Record Sheets, and the coursework sample,
should be submitted to the moderator assigned to the centre, by 1 May. Details of the
procedures and the address of the assigned moderator will be sent to the centre in April. No
work should be submitted for moderation until these details have been received. Teachers
will be responsible for ensuring that each candidate’s Coursework Assignment is
authenticated as the candidates own work. A Statement of Authentication must be attached
to the front of each Coursework Assignment.
The coursework assignment should be about 3000 words, and no longer than 3500 words.
26
Specimen Coursework Assignments
You must choose ONE of the following Assignments
COURSEWORK ONE: BUSINESS PLANNING
Identify a good or service for which there is a gap in the market in your area. Evaluate the
evidence and recommend a start-up plan for a firm to enter this market.
COURSEWORK TWO: MANUFACTURING
Select a firm in your area which is considering some form of change (eg expansion,
diversification, relocation).
Assess the implications of the change and recommend a plan in the areas of either human
resources or marketing which will be involved in making this change.
27
SNOS
bÇÉñÅÉä=d`b
råáí=qÉëí=SJ=`çêéçê~íÉ=píê~íÉÖó
^Çî~åÅÉ=kçíáÅÉ=çÑ=`~ëÉ=píìÇó
káä káä
få=éêÉé~êáåÖ=Å~åÇáÇ~íÉë=Ñçê=íÜÉ=`~ëÉ=píìÇó=é~éÉêI=Å~åÇáÇ~íÉë=~êÉ=~ÇîáëÉÇ=íç=ìåÇÉêí~âÉ
ÖÉåÉê~ä=êÉîáëáçå=~ë=ïÉää=~ë=ÇÉí~áäÉÇ=áåîÉëíáÖ~íáçå=çÑ=áëëìÉë=êÉä~íáåÖ=íç=íÜÉ=`~ëÉ=píìÇó
28
Corporate Strategy
Specimen Paper Module 6
Sweeting & Lea Ltd
Sweeting & Lea Ltd was founded in 1875 by two cousins, Henry Sweeting and Josiah Lea. The firm
was set up in Lancashire as a furniture manufacturer, but quickly began to specialise in the production
of wooden desks and chairs for schools, thus taking advantage of the expansion of education
following the 1871 Education Act, which made provision of education compulsory in England and
Wales.
The firm was subsequently owned by succeeding generations of the two families, who retained the
£1000 share capital. In 1972 Frederick Lea took over as Managing Director. He was a bachelor and
the last surviving member of his family. His fellow shareholders were Nicholas Sweeting, an
architect and Nicholas’s sister, Alison Barker, a doctor. Neither they nor their respective children,
who were also in other occupations, played any active part in Sweeting & Lea Ltd. It was clear that
there was no member of either family able or willing to take over when Frederick Lea retired.
Frederick Lea had run the business in the paternalistic manner typical of his predecessors and,
although conscientious, was regarded by others in the industry as rather unimaginative. He had no
family to provide for, had a comfortable lifestyle, and appeared to lack the incentive to run the firm
ambitiously or in an innovative manner. At its peak, in the 1950s, the firm had 8% of the market
share in school furniture, but this had declined to 2% by 1990. Profits were generally in decline,
though adequate for the undemanding shareholders.
The market for wooden school furniture had declined since the 1950s and the firm had diversified into
desks with tubular metal frames, though some furniture was still made all in wood. There had been
no major investment for some time and much of the capital equipment was over 20 years old. The
firm had a reputation for sound products, reliably delivered to order and its prices were very
competitive. However, little marketing or promotion had taken place for some years, the firm
depending mainly on orders from existing customers.
At its peak, the firm had employed over 100 people but by 1994 there were only 32. Frederick Lea
had been reluctant to make compulsory redundancies, so the workforce has declined through natural
wastage. Most of the employees were over 40 years old, many coming from families who had served
Sweeting & Lea Ltd for several generations.
In 1994 the shareholders of Sweeting & Lea Ltd decided to sell the firm, as Frederick Lea was
anxious to retire. At first, a buyer had proved difficult to find, but in June 1995 a bid of £450 000 was
accepted from Northern Engineering plc. This seemed a modest price, but the owners saw little
alternative but to accept. Northern Engineering plc took over in January 1996, the only proviso being
that David Black retained his position as Works Manager. David Black was 50 years old and had,
like his father and grandfather, spent all his working life at Sweeting & Lea Ltd. He was skilled in
keeping the old machinery working and was highly regarded by the employees who thought that he
was the man who had played a major part in keeping Sweeting & Lea Ltd going during Frederick
Lea’s rather stolid leadership.
29
Northern Engineering plc had a reputation in some quarters as an asset-stripper, but it seemed
genuinely interested in making a success of Sweeting & lea Ltd, which was to trade under its existing
name as a fully-owned subsidiary of Northern Engineering plc. In January 1996 the new owners
appointed as Managing Director an ambitious, hard-working 38-year-old chartered accountant,
Maggie Gunter. She had held senior posts in the Northern Engineering group in the finance and
planning areas but, although she had been on several management courses, had not held an executive
post of overall management responsibility. Maggie Gunter was given 18 months to improve the
efficiency of Sweeting & Lea Ltd and to produce an action plan for its long-term development. She
saw her appointment as a challenge which, if successfully carried out, could greatly help her
reputation and promotion prospects in the Northern Engineering group. She had not been happy
about having to accept David Black as Works Manager, but she had been involved in the appointment
of Bob Forrest as Marketing Manager. Bob Forrest was 32, with experience of marketing in other
areas of Northern Engineering plc, but this was his first senior post. Maggie Gunter thought that Bob
Forrest showed promise, but that she would need to play a leading part in marketing while he gained
experience.
Before taking up her appointment, Maggie Gunter had spent several weeks studying the records of
Sweeting & Lea Ltd and had prepared a plan, which she put to David Black. She was critical of the
firm’s stock control, the level of stock being high. This particularly applied to supplies of wood,
£30 000 being in stock at the time of the takeover. She also believed that distribution could be
improved. David Black had replied that the firm produced and delivered to order, so no regular
pattern could be predicted. Wood was ordered every three months, in order to gain a discount from
the regular supplier.
Maggie Gunter claimed that production could be made more efficient, with less material wasted.
David Black felt rather insulted by this, as he had kept the old, inefficient machinery going for years
and he did not think that more could be achieved without new investment. The meeting had not
appeared to be fruitful, though there was agreement that £25 000 had to be spent on replacing one
machine immediately. David Black was instructed to produce a report showing where efficiency
could be improved and was told to formulate a plan for reducing the workforce by at least five
people.
Maggie Gunter was very keen to reorganise the firm and had been most impressed by a recent course
she had attended on Japanese management practices. Within three weeks of her appointment, she had
called a meeting of all employees at which she issued a briefing paper (Appendix A) which put
forward her ideas for reform. Employees had been encouraged to put forward their ideas.
Maggie Gunter and Bob Forrest then left in February for a month’s visit to Eastern Europe, where
they considered that a potential market existed with the growth of the demand for education in the
post-Communist countries. Some interest was shown, though there was potential competition, with a
German firm setting up a manufacturing plant in the Czech Republic. After several more visits to the
area, Maggie Gunnter and Bob Forrest came back with orders worth in total about £300 000 over four
years from Slovakia, Bulgaria and Albania. There were problems about payment to be sorted out, as
these countries lacked reserves of hard currencies, and distribution had not been finalised. Bob Forrest
was also keen to appoint an agent in Eastern Europe. Despite these loose ends, Maggie Gunter was
hopeful of future business in the area.
Maggie Gunter had also done some research about the possibility of diversification into the industrial
furniture market within the United Kingdom, being particularly interested in the supply of furniture
for works canteens. Hopefully, the economy would continue to recover and firms would be setting up
and expanding, thus requiring such items. Some prospective customers showed interest and Maggie
Gunter also carried out some desk research on economic and market trends and on the potential here,
though £400 000 would be needed for new equipment, training and sales promotion. She worked out a
five year plan for expansion in this area.
30
Meanwhile, progress had been slow in improving efficiency at Sweeting & Lea Ltd. Few employees
had come forward with suggestions, though Maggie Gunter had frequently been unobtainable because
of her absences on marketing expeditions, and the suggestion boxes had not produced a meaningful
plan, though two employees had taken early retirement. Maggie Gunter insisted on three compulsory
redundancies, which were subsequently made. Some progress had been made on stock control,
however, (Appendix B) and on improving the working capital situation. The long-term loan of
£240 000 remained, but a large cash surplus had been accumulated, pending the intended expenditure
on new capital in 1997. Maggie Gunter was not satisfied with the efficiency and waste situation,
however, and declared her intention of carrying out a work study exercise in the firm once the new
machinery had been installed.
Morale seemed to be low amongst the employees. Complaints seemed to be channelled through
David Black, whom Maggie Gunter regarded as too sympathetic to the employees’ grievances. She
was extremely annoyed to find that he and two long-serving employees had visited the retired
Frederick Lea to express their unhappiness. Frederick Lea had felt sympathy with his former
employees and had written to Maggie Gunter to tell her this. She made David Black aware of her
displeasure.
In March 1997 Maggie Gunter prepared her report and her strategic action plan, which were to be
discussed by the Board of Northern Engineering plc in April. Based on the accounts for 1996
(Appendix C) she felt reasonably pleased with her first year. She had two alternativel plans for
consideration, one for continuing Eastern Europe expansion at an initial cost of £250 000, and the
other for entering the industrial furniture market at an outlay of £400 000 (Appendix D). She knew the
board would not approve both these projects.
A week before the Board Meeting, David Black resigned. His letter of resignation complained that he
had continued to run the firm during Maggie Gunter’s frequent absences. He had kept the machinery
working and production going, despite low morale on the shop floor, but had received no recognition.
His experience had not been used in formulating future plans. He considered that he no longer had
any part to play and that his position was therefore untenable. Maggie Gunter was happy to accept his
resignation.
31
Appendix A
Briefing Paper to All Employees of Sweeting & Lea Ltd
If Sweeting & Lea Ltd is to continue trading then all-round improvement is necessary. The firm must
adopt Japanese–style practices on the Kaizen Model immediately in order to improve efficiency and
competitiveness.
1. Stock Control
Far too much money is tied up in stocks. We must move quickly towards a “Just-in-Time”
stock ordering policy so that we receive our supplies only a short time before they are used.
2. Waste
Although much of our equipment is old, it can be used more efficiently. Too much waste of
material is being incurred through careless workmanship and failure to keep a close check on
the settings of the machines. We also need to cut down on the cost of our non-productive
activities, particularly administration and distribution. A work study exercise will be carried
out in order to improve our efficiency. I intend to introduce a system of Lean Production,
eliminating all those costs which are not absolutely necessary. Some redundancies are
inevitable, which I hope can be achieved voluntarily, as we are overstaffed for our present
level of production.
3. Continuous improvement
We must see to improve our performance in all aspects of our business at all times. My door
is always open to those of you with constructive ideas for improvement. If you have anything
to suggest, please come and see me or use the suggestion boxes I have had placed in the
workshop. I am anxious to establish a system of employee-centred management in which
everyone has a part to play.
4. The future
We shall be seeking to expand our markets and our product range and to promote our
products more actively. I intend to instigate a programme of re-investment in new machinery
when our expansion plans are approved by our parent company. With hard work by all we can
improve our performance and turn the Company round. Achieving this success is the only
way to guarantee jobs and increase wage packets.
M. Gunter
M.D.
20/1/96
32
Appendix B
Usage Chart Stocks of Wood: Financial Year 1995
80
70
60
50
Stocks (£000)
40
30
20
10
=Jan
Feb
May
Jun
Aug
Sep
Nov
Dec
Mar
Apr
Jul
Oct
80
70
60
50
Stocks (£000)
40
30
20
10
=Jan
Feb
May
Jun
Aug
Sep
Nov
Dec
Mar
Apr
Jul
Oct
33
Appendix C
Profit and Loss Account and Balance for Sweeting & Lea for the year ending 31 December 1996, with comparative figures for 1995
(Figures rounded to nearest £000)
Profit and Loss Account for Year ending 31 December 1996 Balance Sheet for Sweeting & Lea Ltd at 31 December 1996
1995 £000 1995 £000 £000 £000
£000 £000 Fixed Assets:
980 Sales Revenue 900 400 Land and Buildings 400
610 Cost of Sales 520 225 Plant and Equipment Cost 250
370 Gross Profit 380 180 Less Accumulated Depreciation 195
106 Operating Costs 131 45 55
264 Profit before Interest and Tax 249 30 Vehicles at cost 50
24 Interest 24 10 Less Accumulated Depreciation 15
240 Profit before Tax 225 20 35
80 Tax 75 465 Total Fixed Assets 490
160 Profit for Distribution 150 Current Assets:
8 Dividends Proposed 10 60 Stocks of Raw Materials 20
152 Retained Profit 140 5 Work-in-progress 10
15 Finished Goods 10
80 Debtors 60
5 Cash 80
165 Total Current Assets 180
Current Liabilities;
52 Overdraft 0
75 Creditors 30
88 Provisions for Tax and Dividends 85
215 Total Current Liabilities 115
(50) Net Current Assets 65
415 Net Asset 555
Financed By:
240 Long-term loan 240
1 Ordinary Shares 1
174 Retained profits and reserves 314
415 Net capital employed 555
34
Appendix D
Sweeting & Lea’s expansion plans presented to Board of Northern Engineering plc, 1997
PLAN X PLAN Y
Expansion to Eastern Europe Expansion into Industrial furniture
£000 £000
Expenditure in Year 1997 250 Expenditure in Year 1997 400
Net Cash Flow Net Cash Flow
Year 1998 90 Year 1998 60
Year 1999 80 Year 1999 80
Year 2000 80 Year 2000 120
Year 2001 60 Year 2001 140
Year 2002 160
35
SNOSLMO
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råáí=qÉëí=SJ=`çêéçê~íÉ=píìÇáÉë
káä E^_PQF
^åëïÉê=^ii=èìÉëíáçåë
oÉÑÉêÉåÅÉ=áë=ëÜçïåI=óçì=ëÜçìäÇ=ïêáíÉ=íÜÉ=çåÉ=Ñçê=ïÜáÅÜ=óçì=Ü~îÉ=ÄÉÉå=ÉåíÉêÉÇK=pÜçï=~ää=íÜÉ=ëíÉéë=áå
~åó=Å~äÅìä~íáçåë=~åÇ=ëí~íÉ=íÜÉ=ìåáíëK==`~äÅìä~íçêë=ã~ó=ÄÉ=ìëÉÇK
qÜáë=èìÉëíáçå=é~éÉê=áë=ÇÉëáÖåÉÇ=íç=ÖáîÉ=óçì=íÜÉ=çééçêíìåáíó=íç=ã~âÉ=ÅçååÉÅíáçåë=ÄÉíïÉÉå=ÇáÑÑÉêÉåí
~êÉ~ë=çÑ=_ìëáåÉëë=píìÇáÉë=~åÇ=íç=ìëÉ=ëâáääë=~åÇ=áÇÉ~ë=ÇÉîÉäçéÉÇ=íÜêçìÖÜçìí=íÜÉ=ÅçìêëÉ=áå=åÉï
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qÜÉ=íçí~ä=ã~êâë=Ñçê=íÜáë=é~éÉê=áë=NOM
36
Corporate Strategy
Specimen Paper Module 6
You have already seen the following text which gives details of a case study. It is included in the
paper for reference. Read it again carefully and then answer ALL questions. You are advised to pay
particular attention to the marks allocated to each question.
Sweeting & Lea Ltd
Sweeting & Lea Ltd was founded in 1875 by two cousins, Henry Sweeting and Josiah Lea. The firm
was set up in Lancashire as a furniture manufacturer, but quickly began to specialise in the production
of wooden desks and chairs for schools, thus taking advantage of the expansion of education
following the 1871 Education Act, which made provision of education compulsory in England and
Wales.
The firm was subsequently owned by succeeding generations of the two families, who retained the
£1000 share capital. In 1972 Frederick Lea took over as Managing Director. He was a bachelor and
the last surviving member of his family. His fellow shareholders were Nicholas Sweeting, an
architect and Nicholas’s sister, Alison Barker, a doctor. Neither they nor their respective children,
who were also in other occupations, played any active part in Sweeting & Lea Ltd. It was clear that
there was no member of either family able or willing to take over when Frederick Lea retired.
Frederick Lea had run the business in the paternalistic manner typical of his predecessors and,
although conscientious, was regarded by others in the industry as rather unimaginative. He had no
family to provide for, had a comfortable lifestyle, and appeared to lack the incentive to run the firm
ambitiously or in an innovative manner. At its peak, in the 1950s, the firm had 8% of the market
share in school furniture, but this had inclined to 2% by 1990. Profits were generally in decline,
though adequate for the undemanding shareholders.
The market for wooden school furniture had declined since the 1950s and the firm had diversified into
desks with tubular metal frames, though some furniture was still made all in wood. There had been
no major investment for some time and much of the capital equipment was over 20 years old. The
firm had a reputation for sound products, reliably delivered to order and its prices were very
competitive. However, little marketing or promotion had taken place for some years, the firm
depending mainly on orders from existing customers.
At its peak, the firm had employed over 100 people but by 1994 there were only 32. Frederick Lea
had been reluctant to make compulsory redundancies, so the workforce has declined through natural
wastage. Most of the employees were over 40 years old, many coming from families who had served
Sweeting & Lea Ltd for several generations.
In 1994 the shareholders of Sweeting & Lea Ltd decided to sell the firm, as Frederick Lea was
anxious to retire. At first, a buyer had proved difficult to find, but in June 1995 a bid of £450 000 was
accepted from Northern Engineering plc. This seemed a modest price, but the owners saw little
alternative but to accept. Northern Engineering plc took over in January 1996, the only proviso being
that David Black retained his position as Works Manager. David Black was 50 years old and had,
like his father and grandfather, spent all his working life at Sweeting & Lea Ltd. He was skilled in
keeping the old machinery working and was highly regarded by the employees who thought that he
was the man who had played a major part in keeping Sweeting & Lea Ltd going during Frederick
Lea’s rather stolid leadership.
37
Northern Engineering plc had a reputation in some quarters as an asset-stripper, but it seemed
genuinely interested in making a success of Sweeting & lea Ltd, which was to trade under its existing
name as a fully-owned subsidiary of Northern Engineering plc. In January 1996 the new owners
appointed as Managing Director an ambitious, hard-working 38-year-old chartered accountant,
Maggie Gunter. She had held senior posts in the Northern Engineering group in the finance and
planning areas but, although she had been on several management courses, had not held an executive
post of overall management responsibility. Maggie Gunter was given 18 months to improve the
efficiency of Sweeting & Lea Ltd and to produce an action plan for its long-term development. She
saw her appointment as a challenge which, if successfully carried out, could greatly help her
reputation and promotion prospects in the Northern Engineering group. She had not been happy
about having to accept David Black as Works Manager, but she had been involved in the appointment
of Bob Forrest as Marketing Manager. Bob Forrest was 32, with experience of marketing in other
areas of Northern Engineering plc, but this was his first senior post. Maggie Gunter though that Bob
Forrest showed promise, but that she would need to play a leading part in marketing while he gained
experience.
Before taking up her appointment, Maggie Gunter had spent several weeks studying the records of
Sweeting & Lea Ltd and had prepared a plan, which she put to David Black. She was critical of the
firm’s stock control, the level of stock being high. This particularly applied to supplies of wood,
£30 000 being in stock at the time of the takeover. She also believed that distribution could be
improved. David Black had replied that the firm produced and delivered to order, so no regular
pattern could be predicted. Wood was ordered every three months, in order to gain a discount from
the regular supplier.
Maggie Gunter claimed that production could be made more efficient, with less material wasted.
David Black felt rather insulted by this, as he had kept the old, inefficient machinery going for years
and he did not think that more could be achieved without new investment. The meeting had not
appeared to be fruitful, though there was agreement that £25 000 had to be spent on replacing one
machine immediately. David Black was instructed to produce a report showing where efficiency
could be improved and was told to formulate a plan for reducing the workforce by a least five people.
Maggie Gunter was very keen to reorganise the firm and had been most impressed by a recent course
she had attended on Japanese management practices. Within three weeks of her appointment, she had
called a meeting of all employees at which she issued a briefing paper (Appendix A) which put
forward her ideas for reform. Employees had been encouraged to put forward their ideas.
Maggie Gunter and Bob Forrest then left in February for a month’s visit to Eastern Europe, where
they considered that a potential market existed with the growth of the demand for education in the
post-Communist countries. Some interest was shown, though there was potential competition, with a
German firm setting up a manufacturing plant in the Czech Republic. After several more visits to the
area, Maggie Gunnter and Bob Forrest came back with orders worth in total about £300 000 over four
years from Slovakia, Bulgaria and Albania. There were problems about payment to be sorted out, as
these countries lacked reserves of hard currencies, and distribution had not been finalised. Bob Forrest
was also keen to appoint an agent in Eastern Europe. Despite these loose ends, Maggie Gunter was
hopeful of future business in the area.
Maggie Gunter had also done some research about the possibility of diversification into the industrial
furniture market within the United Kingdom, being particularly interested in the supply of furniture
for works canteens. Hopefully, the economy would continue to recover and firms would be setting up
and expanding, thus requiring such items. Some prospective customers showed interest and Maggie
Gunter also carried out some desk research on economic and market trends and on the potential here,
though £400 000 would be needed for new equipment, training and sales promotion. She worked out a
five year plan for expansion in this area.
38
Meanwhile, progress had been slow in improving efficiency at Sweeting & Lea Ltd. Few employees
had come forward with suggestions, though Maggie Gunter had frequently been unobtainable because
of her absences on marketing expeditions, and the suggestion boxes had not produced a meaningful
plan, though two employees had taken early retirement. Maggie Gunter insisted on three compulsory
redundancies, which were subsequently made. Some progress had been made on stock control,
however, (Appendix B) and on improving the working capital situation. The long-term loan of
£240 000 remained, but a large cash surplus had been accumulated, pending the intended expenditure
on new capital in 1997. Maggie Gunter was not satisfied with the efficiency and waste situation,
however, and declared her intention of carrying out a work study exercise in the firm once the new
machinery had been installed.
Morale seemed to be low amongst the employees. Complaints seemed to be channelled through
David Black, whom Maggie Gunter regarded as too sympathetic to the employees’ grievances. She
was extremely annoyed to find that he and two long-serving employees had visited the retired
Frederick Lea to express their unhappiness. Frederick Lea had felt sympathy with his former
employees and had written to Maggie Gunter to tell her this. She made David Black aware of her
displeasure.
In March 1997 Maggie Gunter prepared her report and her strategic action plan, which were to be
discussed by the Board of Northern Engineering plc in April. Based on the accounts for 1996
(Appendix C) she felt reasonably pleased with her first year. She had two alternatively plans for
consideration, one for continuing Eastern Europe expansion at an initial cost of £250 000, and the
other for entering the industrial furniture market at an outlay of £400 000 (Appendix D). She knew the
board would not approve both these projects.
A week before the Board Meeting, David Black resigned. His letter of resignation complained that he
had continued to run the firm during Maggie Gunter’s frequent absences. He had kept the machinery
working and production going, despite low morale on the shop floor, but had received no recognition.
His experience had not been used in formulating future plans. He considered that he no longer had
any part to play and that his position was therefore untenable. Maggie Gunter was happy to accept his
resignation.
39
Appendix A
Briefing Paper to All Employees of Sweeting & Lea Ltd
If Sweeting & Lea Ltd is to continue trading then all-round improvement is necessary. The
firm must adopt Japanese–style practices on the Kaizen Model immediately in order to
improve efficiency and competitiveness.
5. Stock Control
Far too much money is tied up in stocks. We must move quickly towards a “Just-in-
Time” stock ordering policy so that we receive our supplies only a short time before
they are used.
6. Waste
Although much of our equipment is old, it can be used more efficiently. Too much
waste of material is being incurred through careless workmanship and failure to keep
a close check on the settings of the machines. We also need to cut down on the cost of
our non-productive activities, particularly administration and distribution. A work
study exercise will be carried out in order to improve our efficiency. I intend to
introduce a system of Lean Production, eliminating all those costs which are not
absolutely necessary. Some redundancies are inevitable, which I hope can be achieved
voluntarily, as we are overstaffed for our present level of production.
7. Continuous improvement
We must see to improve our performance in all aspects of our business at all times.
My door is always open to those of you with constructive ideas for improvement. If
you have anything to suggest, please come and see me or use the suggestion boxes I
have had placed in the workshop. I am anxious to establish a system of employee-
centred management in which everyone has a part to play.
8. The future
We shall be seeking to expand our markets and our product range and to promote our
products more actively. I intend to instigate a programme of re-investment in new
machinery when our expansion plans are approved by our parent company. With hard
work by all we can improve our performance and turn the Company round. Achieving
this success is the only way to guarantee jobs and increase wage packets.
M. Gunter
M.D.
20/1/96
40
Appendix B
80
70
60
50
Stocks (£000)
40
30
20
10
=Jan
Feb
May
Jun
Aug
Sep
Nov
Dec
Mar
Apr
Jul
Oct
80
70
60
50
Stocks (£000)
40
30
20
10
=Jan
Feb
May
Jun
Aug
Sep
Nov
Dec
Mar
Apr
Jul
Oct
41
Appendix C
Profit and Loss Account and Balance for Sweeting & Lea for the year ending 31 December 1996, with comparative figures for 1995
(Figures rounded to nearest £000)
Profit and Loss Account for Year ending 31 December 1996 Balance Sheet for Sweeting & Lea Ltd at 31 December 1996
1995 £000 1995 £000 £000 £000
£000 £000 Fixed Assets:
980 Sales Revenue 900 400 Land and Buildings 400
610 Cost of Sales 520 225 Plant and Equipment Cost 250
370 Gross Profit 380 180 Less Accumulated Depreciation 195
106 Operating Costs 131 45 55
264 Profit before Interest and Tax 249 30 Vehicles at cost 50
24 Interest 24 10 Less Accumulated Depreciation 15
240 Profit before Tax 225 20 35
80 Tax 75 465 Total Fixed Assets 490
160 Profit for Distribution 150 Current Assets:
8 Dividends Proposed 10 60 Stocks of Raw Materials 20
152 Retained Profit 140 5 Work-in-progress 10
15 Finished Goods 10
80 Debtors 60
5 Cash 80
165 Total Current Assets 180
Current Liabilities;
52 Overdraft 0
75 Creditors 30
88 Provisions for Tax and Dividends 85
215 Total Current Liabilities 115
(50) Net Current Assets 65
415 Net Asset 555
Financed By:
240 Long-term loan 240
1 Ordinary Shares 1
174 Retained profits and reserves 314
415 Net capital employed 555
42
Appendix D
Sweeting & Lea’s expansion plans presented to Board of Northern Engineering plc, 1997
PLAN X PLAN Y
Expansion to Eastern Europe Expansion into Industrial furniture
£000 £000
Expenditure in Year 1997 250 Expenditure in Year 1997 400
Net Cash Flow Net Cash Flow
Year 1998 90 Year 1998 60
Year 1999 80 Year 1999 80
Year 2000 80 Year 2000 120
Year 2001 60 Year 2001 140
Year 2002 160
43
Corporate Strategy

Answer ALL the questions
1. Recommend a strategic plan which Sweeting and Lea Ltd should construct in order to
achieve long term success in implementing either plan X or Y.
40 marks
2. Maggie Gunter “felt reasonably pleased with her first year” in charge of Sweeting &
Lea Ltd. Evaluate the results of the first year of her strategic plan for the company.
40 marks
3 Evaluates how a rise in interest rates in the UK accompanied by a fall in the rates of
direct tax, could affect Sweeting &Lea Ltd’s strategic plans suggesting appropriate
responses which the firm could make. 40 marks
Total 120 marks
TOTAL MARKS FOR PAPER 120

(120 Plus 6 marks for Quality of Language)
44
Unit 1 Mark Scheme
General Instructions for Marking
1. The paper is to be marked to AS standard, including Quality of Written

Communication.
2. Questions, other than those solely requiring numerical calculations, are to be

marked in Levels of Response. Candidates achieving Level 4 are judged to be
producing an evaluative response. Level 3 indicates achievement of analysis.
Level 2 indicates application of theoretical knowledge to the case or data. Level 1
indicates knowledge without application.
3. Marking of levels should be ‘top down.’ Examiners should look for the highest
level of response achieved by the candidate.
4. The highest level achieved MUST be indicated in the left-hand margin of the
candidate’s answer to each question, or a comment at the end of the answer must
be made to explain why a certain level is being awarded. It is not necessary to
indicate the lower levels of response.
5. In numerical responses, the ‘own figure rule’, must be applied. Candidates can
only be ‘penalised’ (i.e. not rewarded) once for an error. All calculations
following an error must be followed and credited if they are ‘correct’ in terms of
the original error.
6. Mark in red.
7. Only sub-totals and totals must appear in the right-hand margin. Question totals
must be ringed and transferred to the front of the script. Please indicate a Quality
of Written Communication mark at the end and transfer this to the front of the
script.
8. Please annotate scripts as fully as possible so that your thought processes may be
followed. Any script may be used in the awarding process or may be the subject
of an enquiry into results so it is essential to follow the logic of an examiner’s
marking.
9. The mark scheme indicated possible content that candidates might use in their
answers, but is neither exhaustive nor complete. Except in numerical questions,
credit should be given to all correct or logical points. If in doubt, contact the
Principal Examiner.
10. Marking must be positive. Negative marking is not allowed. Irrelevant material
may be indicated and cannot be credited, but it cannot be penalised.
45
Mark Scheme
1. (a) A statement of the firm’s products, markets and technology

expressed in a manner that reflects the fundamental values and
priorities of the organisation
2 for correct definition
1 for a reasonable attempt
Total 2 marks
(b) Valid points could include:
÷ action from pressure groups

÷ legislation or fear of government intervention
÷ genuine concern for the environment
÷ adverse publicity e.g. re genetically modified foods
÷ pressure from shareholders or other stakeholders
÷ similar action from rival firms
Level 2: Valid ideas concerning environmental concerns, related to the

industry or products 3-5 marks
Level 1: Valid ideas but little or no reference to the industry or product
1-2 marks
Total 5 marks
(c) References could be made to:
÷ fair and just employer

÷ fair dealings with suppliers and creditors (e.g. re prompt payment) and with
purchasers
÷ fair dealings with shareholders
÷ being on good terms with residents in the locality
Level 3: Amendments are suggested which refer to other stakeholders with

clear statements of purpose coupled with valid justifications
7-9 marks
Level 2: Amendments are suggested which refer to at least one other
stakeholder with statements of purpose. There may be some attempt at
justification
4-6 marks
Level 1: Some knowledge of stakeholders and their interests is shown
1-3 marks
Total 9 marks
46
(d) References could be made to:
÷ boredom of repetitive tasks
÷ work discipline tied to speed of machine
÷ inability to influence output and possible earnings
Motivation could be improved by

÷ job rotation, job enlargement or introduction of some sort of flexibility and
variety
÷ better working conditions or pay incentives or other perks Candidates will
almost certainly refer to ideas of various motivation theorists.
Level 4: Candidate evaluates methods of improving motivation in the context

of assembly line work.
7-10 marks
Level 3: Candidate analyses the problem and applies theories in context, but
the proposals do not fully realise the particular problems of assembly line
work
5-6 marks
Level 2: Candidate applies theory to the problem, but the response is neither
analytical nor evaluative 3-4 marks
Level 1: Candidate shows knowledge of motivational theory but does not
apply it to data or merely makes descriptive comments about the data
1-2 marks
Total 10 marks
2 (a) PED=1: total revenue remains the same ; % change in demand cancels
% change in price 1 mark for answer
1 mark for comment
Total 2 marks
(b)
÷ demand curve would shift to right; more demanded at any price the firm might
charge compared with earlier situation; identification of cross-elasticity
÷ firm would have to produce more, even at same price – implications for cost
and scale.
÷ would firm alter price to take further advantage? Depends on PED
÷ if competitor’s rise was due to increase costs, same might be true of this firm?
÷ if competitor’s rise was due to quality change what are implications for this
firm?
Level 4: Candidate sees consequences and produces evaluative response

7-9 marks
Level 3: Candidate analyses consequences but does not balance all points or
show insight into issues like quality or cost 5-6 marks
Level 2: Candidate confines answer to shift in demand or other basic points
3-4 marks
Level 1: Candidate shows some knowledge of demand theory 1-2 marks

Total 9 marks
47
(c)
÷ rise in disposable income may lead to increased demand, the extent being
dependant on the income-elasticity of demand for this product
÷ chocolate likely to be income-elastic because it is not an expensive item
÷ price charged is somewhere between 25p and 35p, so it is not a luxury brand
÷ the distribution of the income rise is important; how would it affect consumers
of chocolate, who may have a young age profile
÷ effects will be shared by other producers of chocolate
Level 2: Candidate makes good assessment, with reference to likely income

elasticity of demand and to factors such as effects of income distribution
3-6 marks
Level 1: Candidate shows knowledge on income elasticity, but with no
consideration of the product or market 1-2 marks
Total 6 marks
(d)
÷ depends on success of campaign and how prominently it featured chocolate
÷ depends on whether aimed at children – though all groups eat chocolate to
some extent
÷ depends if any ‘sanctions’ involved, or just a persuasive campaign
÷ firm would react only if sales dropped or poor image was achieved
÷ presumably, similar effects would be felt by rivals
Firm could change its:
÷ image
÷ product (e.g. ingredients)
÷ promotion
÷ target market (e.g. export)
÷ range of products
÷ firm could mount a response against the healthy eating campaign, claiming its
products are healthy
Level 4: Candidate analyses effects and produces a strategy or evaluates

policies firm could follow 9-11 marks
Level 3: Candidate analyses effects, but produces few ideas for firm’s
reactions 6-8 marks
Level 2: Candidate makes valid points about effects on firm or suggests some
reactions, but does not like the two elements 3-5 marks
Level 1: Candidate produces basic but rewardable material about effects or
response 1-2 marks
Total 11 marks
48
3(a) Problems could include
÷ long lines of communication
÷ stifled initiative
÷ low morale
÷ grapevine, rumour or unofficial sources of communication
÷ bureaucratic and possibly autocratic management
÷ impersonal management
÷ all this seems magnified in a firm operating on several sites, with no site
or plant managers apparent in the organisation chart
÷ work overload for some senior managers is possible
Level 4: -
Level 3:
Candidate analyses problems thoroughly and convincingly in the context of
mass production 7-8 marks
Level 2:
Candidate produces some valid points about spans of control, but in a
descriptive rather than analytical manner 4-6 marks
Level 1: Candidate shows knowledge of span of control or describes chart
1-3 marks
Total 8 marks
(b) Possible reasons could include:
÷ clash of personalities or a personality problem of at least one of the managers

÷ method of communication, eg memos used
÷ lack of formal contact or meetings
÷ poor management by managing director in not tackling issue
÷ work overload in operations department
÷ poor Research and Development
Solutions could include:

÷ a change in management personnel, either Managing Director, Marketing or
Operations
÷ restructuring or enlargement of operations Department, eg Create separate
Research and Development Department independent from Operations
÷ meetings or more formal communications
÷ training for managers in communication or in appreciation of each other’s
problems
Level 4:
Candidate suggests valid reasons for the problem and evaluates solutions in
context 7-10 marks
Level 3:
Candidate analyses the problem but solutions are not evaluated or are
unconvincing 5-6 marks
49
Level 2:
Some suggestions are made concerning the causes of the problem 3-4 marks
Level 1:
Some valid remarks are made or some knowledge of communication
problems is shown 1-2 marks
(c) Could be reorganised on a product basis (several products are involved), a

geographical basis (there are several plants), a matrix structure or any other
recognised and rewardable basis. Candidate must justify structure in context
of the firm and product.
The small span of the operations department in a multi-product and
geographically spread firm may be criticised, especially in contrast with the
larger marketing and financial structures.
Level 4: Candidate considers alternatives in context and makes a

recommendation, selecting a realistic one in the context of the firm and
product. Candidate may consider restructuring the size and spread of the
departments (eg operations, marketing and finance) or propose a wider
change, such as a product or geographically based structure.
7-8 marks
Level 3: Candidate considers alternatives in context, but with no clear choice

or judgement made. Discussion may be confined to departmental
reorganisation
5-6 marks
Level 2: Candidate discusses alternative with some reference to the data
3-4 marks
Level 1: Candidate shows some knowledge of alternative structure(s)
1-2 marks
Total 84 marks
50
Quality of Written Communication
Quality of written communication will be assessed in all questions. The assessment will
take place for each candidate’s script as a whole by means of the following=criteria:
Level 4
Candidate expresses complex ideas extremely clearly and fluently. Answers are very
well structured. Arguments are consistently relevant and well developed. There are few,
if any, errors in spelling, punctuation and grammar. 4 marks
Level 3
Candidate expresses moderately complex ideas clearly and answers are well structured.
Arguments are generally relevant and developed. There are few, if any, errors in
grammar, punctuation and spelling. 3 marks
Level 2
Candidate expresses straightforward ideas clearly, but not always fluently. Answers are
not well structured and arguments may be weakly presented. There may be some errors
in grammar, punctuation and spelling. 2 marks
Level 1
Candidate expresses simple ideas clearly, but may be confused or imprecise in the
expression of ideas. There may be noticeable errors in spelling, grammar and
punctuation.
0-1 mark
Total 4 marks
51
Assessment Grid – Unit 1
Question Specification AO1 AO2 AO3 AO4

1 (a) 1/2 2
1 (b) 1/3 2 3
1 (c) 1/2 3 3 3
1 (d) 1/7 2 2 2 4
2 (a) 1/3 2
2 (b) 1/3 2 2 2 3
2 (c) 1/3 2 4
2 (d) 1/4 2 3 3 3
3 (a) 1/5 3 3 2
3 (b) 1/5 2 2 2 4
3 (c) 1/5 2 2 2 2
Totals 24 24 16 16
Total for paper 80 marks plus 4 marks

for Quality of Written Communication
Total 84 marks
52
Unit 2 Mark Scheme

Communication.
2. Questions, other than those solely requiring numerical calculations, are to be marked
in Levels of Response. Candidates achieving Level 4 are judged to be producing an
evaluative response. Level 3 indicates achievement of analysis. Level 2 indicates
application of theoretical knowledge to the case or data. Level 1 indicates knowledge
without application.
3. Marking of levels should be ‘top down.’ Examiners should look for the highest level
of response achieved by the candidate.
candidate’s answer to each question, or a comment at the end of the answer must be
made to explain why a certain level is being awarded. It is not necessary to indicate
the lower levels of response.
5. In numerical responses, the ‘own figure rule’, must be applied. Candidates can only
be ‘penalised’ (i.e. not rewarded) once for an error. All calculations following an
error must be followed and credited if they are ‘correct’ in terms of the original error.
6. Mark in red.
7. Only sub-totals and totals must appear in the right-hand margin. Question totals must
be ringed and transferred to the front of the script. Please indicate a Quality of
Written Communication mark at the end and transfer this to the front of the script.
followed. Any script may be used in the awarding process or may be the subject of
an enquiry into results so it is essential to follow the logic of an examiner’s marking.
Principal Examiner.
10. Marking must be positive. Negative marking is not allowed. Irrelevant material may
be indicated and cannot be credited, but it cannot be penalised.
53
Mark Scheme
1. Valid points could include:

÷ loyalty from customers
÷ established product identity
÷ generic advertising by franchisor
÷ established product quality
÷ financial backing
÷ expertise
Level 4: clearly assess the benefit to a franchise operator of the use of a brand
name in establishing product identity, quality, loyalty etc
7-8 marks (each)
Level 3: analyses some of the benefits to the franchise operator
5-6 marks (each)
Level 2: identifies TWO advantages of a brand name in context
3-4 marks (each)
Level 1: explains and describes TWO benefits in context 1-2 marks (each)
Total 16 marks
÷ That when demand is elastic and price is reduced turnover rises but profit may
not
÷ If demand is inelastic in some market segments then price could be maintained or
increased
÷ Prices could be described as penetration or competitive if elastic, or skimming if
inelastic
÷ The issue of profits as opposed to revenue should arise.
Level 4: evaluates the usefullness of knowing the PED 16- 20 marks

Level 3: analyses impact of different elasticities in terms of valid pricing
policies 13 -15 marks
Level 2: proposes pricing policies, related to elasticity in context
7-12 marks
Level 1: shows understanding of elasticity and offers pricing policy
1-6 marks
Total 20 marks

÷ identifying the specific needs of the new style outlets in terms of cost
effectiveness and likelihood of persuading customers to buy the product in the
context of the situation
÷ types of advertising, above and below the line
÷ local and national sponsorship
÷ sales promotions.
54
Good analysis will examine how an effective technique will bring about the desired
outcome
Level 4: -
Level 3: fully analyses in context 9-10 marks each
Level 2: describes in context 5-8 marks each
Level 1: offers two techniques 1-4 marks each
Total 20 marks
4. (i) 600 2 marks
(ii) 1800 2 marks
(iii) 3 2 marks
(b) Valid ideas include:

÷ storage facilities
÷ fluctuations in demand
÷ deterioration of stock
÷ transport costs
÷ anticipated usage rates
÷ frequency of deliveries offered
Level 4: makes evaluative comments in context of Harry Ramsden

16-20 marks
Level 3: Analyses the factors in context of Harry Ramsden
11-15 marks
Level 2: offers relevant ideas about stock levels
6-10 marks
Level 1: elements of knowledge, simple insights into the factors involved
1-5 marks
Total 20 marks
5. Valid points should refer to economies of scale including:
÷ Bulk buying
÷ Fixed costs including rent and managerial salaries
÷ Storage facilities
Level 4: makes relevant judgements concerning achievements of economies

of scale 13 -18 marks
Level 3: analyses effect of scale of economies 11-13 marks
Level 2: focus of answer is on economies of scale in context 6-10 marks
Level 1: as above but not in context 1-5 marks
Total 18 mark
55
6. Valid points include:
÷ need for reliable suppliers
÷ loss of transort economies
÷ problems of coping with sudden changes in demand
÷ cost of stock outs
÷ need for a good management information system
÷ note context of fast food industry
Level 4: evaluation of issues using JIT methods in context 16-20 marks

Level 3: analysis of relevant issues 11-15 marks
Level 2: offers relevant ideas concerning JIT methods 6-10 marks
Level 1:provides statements on JIT methods 1-5 marks
56
Level 4
Level 3
grammar, punctuation and spelling. 4-5 marks
Level 2
in grammar, punctuation and spelling. 2-3 marks
Level 1
punctuation.
0-1 mark
Total 6 marks
57
Unit 2 AO1 AO2 AO3 AO4 TOTAL
1 4 4 4 4 16
2 6 6 3 5 20
3 8 8 4 20
4(a) i 1 1 2
ii 1 1 2
iii 1 1 2
4 (b) 5 5 5 5 20
5 5 5 3 5 18
6 5 5 5 5 20
Total 36 36 24 24 120
Total for Paper 120 marks plus 6 marks for

Total 126 marks
58
Unit 3 Mark Scheme

Communication.
2. Questions, other than those solely requiring numerical calculations, are to be marked
in Levels of Response. Candidates achieving Level 4 are judged to be producing an
application of theoretical knowledge to the case or data. Level 1 indicates knowledge
3. Marking of levels should be ‘top down.’ Examiners should look for the highest level
of response achieved by the candidate.
candidate’s answer to each question, or a comment at the end of the answer must be
made to explain why a certain level is being awarded. It is not necessary to indicate
the lower levels of response.
5. In numerical responses, the ‘own figure rule’, must be applied. Candidates can only
be ‘penalised’ (i.e. not rewarded) once for an error. All calculations following an
error must be followed and credited if they are ‘correct’ in terms of the original error.
6. Mark in red.
7. Only sub-totals and totals must appear in the right-hand margin. Question totals must
be ringed and transferred to the front of the script. Please indicate a Quality of
Written Communication mark at the end and transfer this to the front of the script.
followed. Any script may be used in the awarding process or may be the subject of
an enquiry into results so it is essential to follow the logic of an examiner’s marking.
Principal Examiner.
10. Marking must be positive. Negative marking is not allowed. Irrelevant material may
be indicated and cannot be credited, but it cannot be penalised.
59
Mark Scheme
1. (a) (i) £8
(ii) 37 500 units - Break even in quantity
£750 000 - Break even in revenue
(iii) 42 500 accept £950 000
For each of the above four answers, 1 for method, 1 for correct answer
(iv) 15.75
2 marks for average overhead cost per unit - £3.75, 1 mark for adding costs, 1 mark
for correct answer
(Total 12 marks)
(b) (i) On purely numerical grounds the contribution of £1 and the cost of the
machine at £20 000 means the firm only breaks even, it does have the
capacity however and the machine could be used for future orders
possibly. The rivalry of the own label product can be considered but the
new customer may provide more orders.
Level 4 Makes recommendation after evaluation of

numerical and non-numerical factors 15-20 marks
Level 3 Analyses numerical and non-numerical factors 5-14 marks
Level 2 Identifys relevant factors in context 3-4 marks
Level 1 Shows some knowledge of relevant factors 1-2 marks
=====================================================================================================(Total 20 marks)
(c) (i) 58.6% 1 for method, 1 for answer

(ii) 12.1% as above
(iii) 5.7% as above (Total 6 marks)
(d) Comments could identify results of current ratio of 2:3 as being a good one
with reasons such as ability to meet short term creditors demands and a
sound working capital position. The gearing ratio of 0.55 seems reasonable
as demands to meet interest payments relative to shareholders needs are
balanced. Could be seen as highly geared by comparison to some
industries.
For each ratio:

Level 4: -
Level 3: makes valid comment consistent with calculation 3-4 marks
Level 2: calculates ratios 1-2 marks
Level 1: -
(Total 8 marks)
60
2. (a) An evaluative use of the data that shows the effect of different methods, expect
to see straight line which takes the same amount off each year and reduces
balance which takes an increasing amount each year. Cost is £140 000 and
£7000 scrap value. Own figure rule to apply for calculations.
Level 4: makes full assessment of the problem considering all relevant factors
9-12 marks
Level 3: analyses figures to produce valid response 6-8 marks
Level 2: provides reasoned response in context 4-5 marks
Level 1: makes relevant comments or shows knowledge of methods of
depreciation 1-3 marks
(Total 12 marks)
(b) (i) Correctly calculates the balances and identifies positive/negative values
(160) (22)
1 mark each = 2 marks
(ii) The firm faces significant seasonal fluctuations in sales and has to pay out wages
and materials purchases before receiving the income from sales. Also increasing
overheads occur as the sales change, clearly once receipts have caught up and
output falls the firm is in an improved situation. Figures can be quoted as can the
months of significance.
a number of solutions could be proposed, these include
overdraft
factoring
new credit terms
stock control
delaying payments
seeking new markets and products with more stable sales.
Level 4 Evaluates the information and produces a reasoned 11-20marks

response
Level 3 Analyses the information to identify the more difficult
periods and the reasons for them 8-10 marks
Level 2 uses some of the figures to provide an overview of the
problem 5-7 marks
Level 1 shows some understanding of the cash flow problem 1-4 mark
(Total 20 marks)
61
Quality of Written Communication.
Level 4
Level 3
Level 2
Level 1
punctuation.
0-1 mark
Total 4 marks
62
Assessment Grid - Module 3
Module 3 AO1 AO2 AO3 AO4 Total
1(a)(i) 1 1 2
(a) (ii) 2 2 4
(a) (iii) 1 1 2
(a) (iv) 2 2 4
(b) 2 2 10 6 20
(c)(i) 1 1 2
(c) (ii) 1 1 2
(c) (iii) 1 1 2
(d) (i) 2 2 4
(d) (ii) 2 2 4
2 (a) (i) 3 2 3 4 12
(b) (i) 2 2
(b) (ii) 4 3 3 10 20
Total 20 20 20 20 80
Total for Paper 80 marks plus 4 marks

For Quality of Written Communication
Total 84 marks
63
Unit 4 Mark Scheme
General Instruction for Marking
1. The paper is to be marked to Advanced standard, including Quality of Written

Communication.
2. Questions other than those solely requiring numerical calculations, are to be

marked in Levels of Response. Candidates achieving Level 4 are judged to be
producing an evaluative response. Level 3 indicates achievement of analysis.
Level 2 indicates application of theoretical knowledge of the case or data. Level 1
indicates knowledge without application.
3. Marking of levels should be ‘top down.’ Examiners should look for the highest
level of response achieved by the candidate.
candidate’s answer to each question, or a comment at the end of the answer must
be made to explain why a certain level is being rewarded. It is not necessary to
indicate the lower levels of response.
5. In numerical responses, the ‘own figure rule’ must be applied. Candidates can
only be ‘penalised’ (i.e. not rewarded) once for an error. All calculations
following an error must be followed and credited if they are ‘correct’ in terms of
the original error.
6. Mark in red.
7. Only sub-totals and totals must appear in the right-hand margin. Question totals
must be ringed and transferred to the front of the script. Please indicate a Quality
of Written Communication mark at the end and transfer this to the front of the
script.
8. Please annotate scripts as fully as possible so that your thought process may be
followed. Any script may be used in the awarding process or may be subject of
an enquiry into results so it is essential to follow the logic of an examiner’s
marking.
9. The mark scheme indicates possible content that candidates might use in their
credit should be given to all correct or logical points.
10. Marking must be positive. Negative marking is not allowed. Irrelevant material
may be indicated and cannot be credited, but it cannot be penalised.
64
Mark Scheme
1 (a) Relevant factors could include:

÷ calculated results (accept reasonable own figures): payback 2 years 7 months
NPV 232.1
÷ reliability of forecasted net cash flows
÷ possible changes in economic activity
÷ changes in interest rates
÷ changes in labour force required
÷ opportunity cost of funds
÷ predicted scrap value of machine
÷ the return on capital is only 4% more than cost of capital
÷ firm is in fashion industry so may value quick returns before fashion changes
Level 4: evaluates numerical and non-numerical factors and makes a valid

recommendation 14-18 marks
Level 3: analyses numerical and non-numerical factors 9-13 marks
Level 2: identifies numerical and non-numerical factors 5-8 marks
Level 1: considers either numerical or non-numerical factors 1-4 marks
(1 mark for payback o.f.r and 1 mark for NPV o.f..r)
(b) (i) Points could include:
÷ CAD
÷ graphics
÷ simulation
÷ data for production planning and scheduling
÷ controlling
Level 4: assesses relevant points and relates them clearly to reducing time
3-4 marks
Level 3: analyses relevant points 1-2 marks
Level 2:-
Level 1:-
(ii) Points could include:

÷ improvements in quality
÷ range of choices, styles
÷ distribution and availability
÷ status of labels.
(Must show clear understanding of concept for Level 3)
Level 4: evaluates those factors that are relevant when adding value, in context
5-10 marks
Level 3: -
Level 2: show understanding of concept in explanation 3-4 marks
Level 1: only offers methods 1-2 marks
65
(c) Points include
the role and functions of unions in working for employees interests and in
communicating with employees as well as acting as pressure groups
resolving industrial disputes
identifying the role of negotiators
ACAS tribunals
the changing nature of industrial democracy
new legislation
Level 4: Provides evaluative comments upon role of unions and the methods
businesses use to reduce and resolve industrial conflict 9-16 marks
Level 3: Provides discrete, analytical and valid points about unions and
industrial relations policy 3-8 marks
Level 2: Makes statements about union’s role and methods of resolution

2 marks
Level 1: Makes a statement about unions or methods of resolution 1 mark
(Total 48 marks)
2 a) (I)C= 1 H=6, I=14 3 marks
(ii)D=14, E=12, H=14 3 marks
(b) A, C, F, G, I 16 days 3 marks
(c)i) The amount of time an activity can be delayed without affecting the overall
earliest project completion time. 2 marks
ii) D=11 B=6 E=6 3 marks
d) Material could include:

÷ reliability of data
÷ identifies parallel activities and sequential tasks
÷ flexibility of sub-contractors
÷ control over sub-contractors
÷ effect of external factors, eg weather, stock deliveries
÷ possible redeployment of resources
Level 4: Evaluates the issues in the context of the employment of sub-contractors

16-18 marks
Level 3: Anlayses the issues raised by the Gantt chart
5-15 marks
Level 2: Describes some of the issues raised 3-4 marks
Level 1: Shows knowledge of Gantt charts 1-2 marks
( Total 32 marks )
66
Level 4
Level 3
Level 2
Level 1
punctuation.
0-1 mark
Total 4 marks
67
Assessment Grid Unit 4
Unit 4 AO1 AO2 AO3 AO4 TOTAL
1(a) 4 4 5 5 18
(b) (i) 2 2 4
(b) (ii) 2 2 6 10
(c) 1 1 6 8 16
(2) (a) (i)
1 2 3
(a) (ii) 1 2 3
(b) 2 1 3
(c) (i) 1 1 2
(c) (ii) 2 1 3
(d) 2 2 11 3 18
Total 16 16 24 24 80
Total for paper 80 plus 4 marks for

Quality of written communication
84 marks total
68
Mark Scheme for Module 5 (Alternative to Coursework)
The purpose of the paper is to test candidates using the same assessment objectives as the
coursework.
Therefore candidates need to select appropriate information in a systematic way using a

range of sources, providing a detailed and critical understanding of the specific content.
The application of detailed knowledge and understanding needs to be applied to the

problems and issues identified.
Analysis should be undertaken using a range of techniques and a detailed appreciation of

the limitations of the techniques should be evident.
Evaluation and assessment of information should distinguish between fact and opinion
and conclusions and recommendations should be based upon a synthesis of information
from a variety of sources.
69
Mark Scheme
Material which should be considered in the evaluation includes:

Option A: Relocation.
Better site on industrial zone: PIP factory already there
Forecast break-even in 7 years plus 6% annual return on sale of present site
No more fines for pollution on present site
Redundancy costs; need for recruitment
Disruption during move, including IT transfer
Unknown factors:
New products, existing products or mixture (Ansoff relevant)
Attitude to move of key staff
Possible industrial action
Distribution links and costs; where exactly is the site? (Appendix C)
Will PIP want to amalgamate firms on new site, involving management
changes?
Option B: Management Buyout

Managers can raise money, with a backer keen to keep firm on present site
Pollution problems and unsuitability of existing site will continue
No need for redundancies and relocation costs
Unknown factors:
New products, existing products or a mixture?
Is the backer genuine and reliable? Can the directors raise the money?
Production lines need replacement; are funds available?
Option C: Rebuild factory

New product lines to take advantage of changes in demand
New capital equipment needed
Break-even 8 years
Still on a poor site with possible environmental problems
Unknown factors:
Training or personnel reorganisation needed?
Will trends in Appendix A continue? Memo from Marketing Director says “two
or three years”.
Unknown factors relevant to all Options:

Economic trends (eg present high value of £ may not continue and exports may
become more attractive again.)
Competitors, particularly in DIY market. Marketing expenses needed in order to
establish firm in new market.
What is the parent company’s attitude? Would they really prefer to close the
firm in the light of the trends shown in Appendix B?
70
Assessment Criteria
AO1 Demonstrate knowledge and critical understanding of the specified content.
Mark
Range
÷ shows detailed evidence of information used from available sources 16-20
together with effective use of such information in order to demonstrate
critical understanding of the specified content
÷ shows evidence of information used and a systematic approach to use of 11-15
data with a demonstration of an understanding of the specified content
÷ shows evidence of selection and use of information from more than one 6-10
source in order to address the question.
÷ shows evidence of relevant knowledge and understanding of content 1-5
AO2 Apply knowledge and understanding to problems and issues arising from both
familiar and unfamiliar situations
Mark
Range
÷ shows the application of detailed knowledge and critical understanding 16-20
to issues arising from the problem, underpinned by synthesis of theory
÷ shows the application of knowledge and critical understanding to issues 11-15
arising from the problem, underpinned by theory
÷ shows the application of knowledge and understanding to issues arising 6-10
from the problem with some use of theory
÷ shows the application of knowledge and understanding to the issues 1-5
arising from the problem
71
AO3 Analyse problems, issues and situations
Mark
Range
÷ analyses problems, issues arising and situations making valid 16-20
suggestions as to the data required for a full analysis
÷ analyses problem and issues arising and appreciates the limitations of the 11-15
data
÷ attempts to analyse problem and issues arising from problem 6-10
÷ attempts to analyse problem 1-5
AO4 Evaluate, distinguish between fact and opinion and assess information from a
variety of sources
Mark
Range
÷ evaluates and distinguishes between fact and opinion and offers a valid 16-20
recommendation based on the synthesis of the available information
÷ evaluates information, distinguishing between fact and opinion and 11-15
offers a conclusion
÷ attempts to evaluate problem and issues arising from problem 6-10
÷ makes a recommendation 1-5
72
Level 4
Level 3
Level 2
Level 1
punctuation.
0-1 mark
Total 4 marks
Assessment Grid - Module 5 (Alternative to coursework)
Section AO1 AO2 AO3 AO4 TOTAL
Total 20 20 20 20 80
Total marks for this paper 80 plus 4 marks

73
Coursework Assessment Criteria – Unit 5
AO1 Demonstrate knowledge and critical understanding of the specified content.
Mark
Range
÷ shows detailed evidence of information used from available sources 16-20
together with effective use of such information in order to demonstrate
critical understanding of the specified content
÷ shows evidence of information used and a systematic approach to use of 11-15
data with a demonstration of an understanding of the specified content
÷ shows evidence of selection and use of information from more than one 6-10
source in order to address the question.
÷ shows evidence of relevant knowledge and understanding of content 1-5
AO2 Apply knowledge and understanding to problems and issues arising from both
familiar and unfamiliar situations
Mark
Range
÷ shows the application of detailed knowledge and critical understanding 16-20
to issues arising from the problem, underpinned by synthesis of theory
÷ shows the application of knowledge and critical understanding to issues 11-15
arising from the problem, underpinned by theory
÷ shows the application of knowledge and understanding to issues arising 6-10
from the problem with some use of theory
÷ shows the application of knowledge and understanding to the issues 1-5
arising from the problem
74
AO3 Analyse problems, issues and situations
Mark
Range
÷ analyses problems, issues arising and situations making valid 16-20
suggestions as to the data required for a full analysis
÷ analyses problem and issues arising and appreciates the limitations of the 11-15
data
÷ attempts to analyse problem and issues arising from problem 6-10
÷ attempts to analyse problem 1-5
AO4 Evaluate, distinguish between fact and opinion and assess information from a
variety of sources
Mark
Range
÷ evaluates and distinguishes between fact and opinion and offers a valid 16-20
recommendation based on the synthesis of the available information
÷ evaluates information, distinguishing between fact and opinion and 11-15
offers a conclusion
÷ attempts to evaluate problem and issues arising from problem 6-10
÷ makes a recommendation 1-5
75
Notes for Guidance
Candidates opting for coursework in unit 5 are required to choose ONE assignment
question from the two set by Edexcel. As the questions will change from year to year it is
essential that teachers and candidates ensure that they are using the assignment questions
set for the year in which the unit is entered.
The assignment will require candidates to make selections, analyse, make judgements and
to evaluate. It is the demonstration of the higher order skills that will provide access to
higher marks. Candidates’ attention should be drawn to the Assessment Criteria in which
marks are allocated. The coursework must address the question set by Edexcel and
candidates should make recommendations for action that the firm could adopt, where
these are appropriate.
The Coursework assignment must show evidence of individual enquiry, analysis and
evaluation, even when several candidates have based their study on the same business.
Successful Coursework Assignments will demonstrate an integration of both primary and

secondary research with appropriate techniques and concepts drawn from relevant parts
of the syllabus. Candidates should be reminded of the importance of explaining their
course of action when undertaking research. The use of a particular technique of research
or of analysis should be justified in the assignment. The source material should be
acknowledged in full. Quotations must be attributed. Once information has been
collected it needs to be interpreted and its validity and reliability will need to be
considered.
Candidates should appreciate the importance of Quality of Written Communication.
Assignments should be submitted in soft covered binders with the following information
clearly visible from the outside:
÷ Syllabus name and number;

÷ Candidate name and number;
÷ Centre name and number;
÷ The exact title of the assignment.
Appendix material should be included only if directly referred to in the text but it should
be kept to a minimum, avoiding multiple copies of questionnaires and excessive pre-
printed material from firms.
Centres are advised to distribute these notes and criteria for Assessment and Quality of
Written Communication to candidates.
76
Level 4
Level 3
Level 2
Level 1
punctuation.
0-1 mark
Total 4 marks
77
EDEXCEL – ADVANCED GCE BUSINESS STUDIES
COURSEWORK ASSIGNMENT ASSESSMENT FORM
Centre Name: Centre No: Candidate Name: Candidate No.
Please select the appropriate mark range and enter the mark you assess as appropriate within that range. ONLY ONE MARK MUST APPEAR IN EACH BOX.
AO1: Demonstrate knowledge and critical understanding of the specified content AO3: Analyse problems, issues and situations
16-20 analyses problems, issues arising making valid suggestions as to the data required for
16-20 shows detailed evidence of information used from available sources together a full analysis
with effective use of such information in order to demonstrate critical
understanding of the specified content 11-15 analyses problem and issues arising and appreciates the limitations of the data
11-15 shows evidence of information used and a systematic approach to use of data
6-10 attempts to analyse the problem and issues arising form the problem
with a demonstration of an understanding of the specified content
6-10 shows evidence of selection and use of information from more than one T/M Mod 1-5 attempts to analyse problem
source in order to address the question. T/M Mod
1-5 shows evidence of relevant knowledge and understanding of content.
Mark awarded for AO3
Mark awarded for AO1
AO2: Apply knowledge and understanding to problems and issues arising
form both familiar and unfamiliar situations AO4: Evaluate, distinguish between fact and opinion and assess information from a
variety of sources
16-20 shows the application of detailed knowledge and critical understanding to
issues arising from the problem, underpinned by synthesis of theory 16-20 evaluates and distinguishes between fact and opinion and offers a valid recommendation
based on the synthesis of the available information
11-15 shows the application of knowledge and critical understanding to issues
arising from the problem, underpinned by theory 11-15 evaluates information, distinguishes between fact and opinion and offers
a conclusion
6–10 shows the application of knowledge and understanding to issues arising from
the problem
T/M Mod 6-10 attempts to evaluate problem and issues arising from problem T/M Mod
1-5 shows the application of knowledge and understanding to the issues arising
from the problem 1-5 makes a recommendation
Mark awarded for AO2 Mark awarded for AO4
(Level 4 = 4 marks, Level 3 = 3 marks, Level 2 = 2 marks, Level 1 = 1 marks)
TOTAL MARKS Teacher’s mark Moderator’s mark
(excluding Quality of Written Communication)
Teacher’s mark Moderator’s mark
Teacher’s signature Date
79
Unit 6 Mark Scheme
General Instruction for Marking
1 The paper is to be marked to A Level standard, including Quality of Written

Communication.
2 Questions other than those solely requiring numerical calculations, are to be marked in
Levels of Response. Candidates achieving Level 4 are judged to be producing an
application of theoretical knowledge of the case or data. Level 1 indicates knowledge
3 Marking of levels should be ‘top down.’ Examiners should look for the highest level of
response achieved by the candidate.
4 The highest level achieved MUST be indicated in the left-hand margin of the candidate’s
answer to each question, or a comment at the end of the answer must be made to explain
why a certain level is being rewarded. It is not necessary to indicate the lower levels of
response.
5 In numerical responses, the ‘own figure rule’ must be applied. Candidates can only be
‘penalised’ (i.e. not rewarded) once for an error. All calculations following an error must
be followed and credited if they are ‘correct’ in terms of the original error.
6 Mark in red.
7 Only sub-totals and totals must appear in the right-hand margin. Question totals must be
ringed and transferred to the front of the script. Please indicate a Quality of Written
Communication mark at the end and transfer this to the front of the script.
8 Please annotate scripts as fully as possible so that your thought process may be followed.
Any script may be used in the awarding process or may be the subject of an enquiry into
results so it is essential to follow the logic of an examiner’s marking.
9 The mark scheme indicates possible content that candidates might use in their answers,
but is neither exhaustive nor complete. Except in numerical questions, credit should be
given to all correct or logical points. If in doubt, contact the Principal Examiner.
10 Marking must be positive. Negative marking is not allowed. Irrelevant material may be
indicated and cannot be credited, but it cannot be penalised.
80
Mark Scheme
All questions in this unit are synoptic. Thus, in their responses, candidates are expected
to demonstrate the connections between different aspects of the business studies
specification. The synoptic unit, although having a specific range of topics, also requires
candidates to refer to knowledge and techniques learned in earlier units. Analytical and
evaluative responses that effectively integrate elements of the specification will be
rewarded appropriately.
Synoptic content is incorporated into the mark scheme for each question.
1. Recommend a strategic plan which Sweeting and Lea Ltd could construct in order to
achieve long term success in implementing either plan X or plan Y 40 marks
Candidates may choose EITHER Plan X OR Plan Y

1 Relevant material would include:
Plan X:
takes 3 years: ARR is 6% pa: Lasts 4 years: costs £250 000: brings in £60 000.
Problems include:
÷ timing and method of payment
÷ distribution problems; pros and cons of an agent
÷ competition from German firm
÷ economic and political unreliability of some of the countries mentioned
÷ possible trade restrictions and exchange rate problems
÷ language and cultural problems
÷ general problems of entering foreign markets
Synoptic approach could include:
÷ effects on labour force and morale if the markets do not emerge (eg possible
redundancies)
÷ opportunity cost effect on finances if money has to be poured into marketing or
there are problems caused by exchange rates, trade restrictions etc.
÷ effects on organisation if M/D and marketing manager are absent a great deal on
marketing missions
÷ general problems and effects of risk in the light of unreliable market research
÷ effect on existing customers and contracts
Plan Y:
takes 4 years: ARR 8% pa: lasts 5 years: costs £400 000: produces £160 000
Problems include:
÷ little research or evidence of future orders
÷ economic variables may change
÷ need for new capital equipment, training and possibly recruitment
÷ need to establish name in new markets
÷ effects on existing customers and equipment: are they going to continue with
current products?
81
Material could include:
÷ carry-out reliable market research, including existing competition
÷ obtain contracts, preferably long term and reliable
÷ carry-out DCF appraisal on new investment required
÷ construct manpower plan, including training and reorganisation of production in
the light of research or contracts signed
Level 4: 29-40 marks

Candidate makes recommendation after full evaluation of the problems

Candidate analyses the relevant factors
Level 2: 9-16 marks

Candidate applies theory to the problem
Level 1: 1-8 marks
Candidate identifies some relevant points or shows knowledge of relevant theory
Total 40 marks
82
2. Maggie Gunter “felt reasonably pleased with her first year” in charge of Sweeting &
Lea Ltd. Evaluate the results of the first year of her strategic plan for the company.
40 marks
Relevant material would include:
Financial performance:
ratios and comments, including some of the following:
1995 1996
R.O.C.E 0.64 0.45
Profit down, but capital old, so any return may seem exaggerated; new
£25000 investment offsets this slightly
Profit mark-up 0.27 0.28

No change, despite lower turnover; firm reported to be competitive,
although market share falling, so has price changed? Elasticity of demand?
Asset turnover 2.38 1.62

Lower turnover, although investment in assets has risen
Current 0.76 1.56

Greatly improved, no longer negative working capital, mainly due to cash
surplus and stock reductions; overdraft paid-off
Acid test 0.39 1.22

Greatly improved, mainly due to cash accumulation
Stock turnover 12.25 times 22.5 times

Astonishingly good for manufacturer, caused mainly by stock control
Improvements
Debtor days 29.8 24.33

Not a problem, anyway?
Productive efficiency:
Stock control improved, but low at end of year – no buffer? Discount lost?
Less w-i-p and finished goods – more efficient or few orders?
Human relations:
morale low; David Black resigned
redundancies made – effect on morale as well as efficiency
absentee MD; Theory Y approach in Briefing paper not borne out by subsequent
events
fear of work study
no preparation for change in management style; relate to motivation/leadership
theories.
83
Approach could include:
÷ Productive performance improved at the expense of low morale and alienation of
David Black
÷ Money saved on stocks but possibly squandered on dubiously successful
marketing activities
÷ Figures on waste and productivity not known; some points of plan may not have
been achieved
÷ Management of change not carried-out well; some points achieved at the expense
of others
÷ Work study not carried-out; still pending; effects on morale?
÷ Effects on consultation; despite briefing paper; effect on performance and
motivation?
Candidate makes sound evaluation of the problem
Candidate produces sound analysis
Level 2: 9-16 marks
Candidate applies theory to the problem
Level 1: 1-8 marks
Candidate shows knowledge of relevant theory or identifies relevant factors
Total 40 marks
84
3. Analyse how a rise in interest rates in the UK accompanied by a fall in the rates of
direct tax, could affect Sweeting &Lea Ltd’s strategic plans and evaluate appropriate
responses which the firm could make. 40 marks
Relevant material would include:
Interest rates:
Cost of borrowing up
Possible pressure on wage demands and higher material costs
Effects on expansion plans, especially Plan Y and CAD if borrowing expensive
or there is a downturn in economic activity
possible rise in exchange rate
Direct taxes:
less pressure on wages
more retained profit if Corporation Tax is reduced
more buoyant UK market – encourage Plan Y?
Firm’s response
Depends on which of the two variables is stronger and the extent of the
interest rate rise / tax rate fall; which direct taxes are involved?
Will economy rise or fall?
Postpone expansion or try to get fixed-rate loan or reschedule debt?
turn to Plan X, unless exchange rate moves unfavourably
reduce costs, e.g. more redundancies
can firm survive a recession – attitude of Northern Engineering important
Can firm take advantage of a rise in the domestic market?
Need for more R+D and promotion – at a cost

Candidate produces a coherent and convincing recommendation following
logically from a sound evaluation of both elements

Candidates produces a sound analysis of both elements, analysing the contradiction
between the two elements
Level 2: 9-16 marks

Candidate applies knowledge of the appropriate areas of economic theory. There may
be some realisation of the contradiction between the two elements.
Level 1: 1-8 marks

Candidate shows knowledge of appropriate areas of theory and identifies relevant
points.
Total 40 marks
85
Quality of Written Communication will be assessed in all questions. The assessment

will take place for each candidate’s script as a whole by means of the following
criteria:
Level 4
well structured. Arguments are consistently relevant and well-developed. There are
few, if any, errors in spelling, punctuation and grammar. 6 marks
Level 3
Candidate expresses moderately complex ideas clearly and answers are well-
structured. Arguments are generally relevant and developed. There are few, if any,
errors in grammar, punctuation and spelling. 4-5 marks
Level 2
Candidate expresses straightforward ideas clearly, but not always fluently. Answers
are not well structured and arguments may be weakly presented. There may be some
errors in grammar, punctuation and spelling. 2-3 marks
Level 1
punctuation. 0-1 mark
TOTAL 6 MARKS
86
Question Assessment Assessment Assessment Assessment Quality of

Objective 1 Objective 2 Objective 3 Objective 4 Language
1 8 8 12 12
2 8 8 12 12
3 8 8 12 12
Total 24 24 36 36 6
Total for paper 120 marks plus 6 marks

N.B By the nature of corporate strategy and because of the need for synoptic assessment,
some topics from earlier modules (e.g. accounting ratios, investment appraisals, stock
control, leadership and motivation) are drawn upon in these questions, as well as some
topics from module 6.
87
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Specimen Paper Unit 1

Answer all the questions

(a) Explain what is meant by a mission statement. 2 marks

(b) Suggest reasons why the directors might be considering a reference to

(d) Analyse the effects of a vigorous ‘healthy eating’ campaign by the

The board of directors has commissioned a firm of management consultants to advise

Here is the current organisational chart of Fizzydrinks plc.

Personnel Marketing Finance Operations

Specimen Paper Unit 2

UK expenditure on eating out Fast food sales

Model stock control graph for small unit restaurant

Source: Adapted from the Financial Mail on Sunday

2. Assess the ways in which an understanding of price elasticity of demand could

3. Suggest TWO promotional techniques Harry Ramsden’s could use to create

4. Using the stock control graph shown state:

(a)(i) the re-order quantity; 2 marks

(ii) the weekly usage quantity; 2 marks

(iii) the number of orders each week. 2 marks

Specimen Paper Unit 3

Overhead costs £300 000

Showing your working in full calculate:

(i) the contribution of each sweater sold 2 marks

(ii) the break even level of output in respect of quantity and

(iii) the margin of safety at the proposed level of output 2 marks

(i) gross profit margin; 2 marks

(d) Calculate and comment on the firms:

(i) current ratio; 4 marks

Month Sept Oct Nov Dec Jan Feb Mar Apr

Balance (21) (96) (252) (335)

Specimen Paper Unit 4

1 Ransom Ltd is a manufacturer of fashion garments. It is considering investing in a new

Activity Duration in days Labour requirements

(c)(i) Explain what is meant by the term total float? 2 marks

Gantt chart for building 2 new houses

Specimen Paper Unit 5 (Alternative to Coursework)

You are advised to spend at least 15 minutes reading time

The following information may be of use to you in answering the questions.

UK RETAIL SALES UK HOUSEHOLD EXPENDITURE:

SSP Profits 1993 - 99

SSP Rrofits 1993-1999

Nature of work undertaken by employees at Stratford Paint Pigments Limited.

Location and Communication

Memo from Finance director to Chairman of PIP plc

Memo from Personnel Director to Chairman of PIP plc

availability of schools for staff families

The final cost will be about £700,000

Memo from Marketing Director to Chairman of PIP plc

Specimen Paper Unit 5 (Coursework Option)

(a) investigate specific business activities through individual studies;

(c) demonstrate awareness of a variety of solutions to business problems and the

(d) enhance underpinning knowledge.

You must choose ONE of the following Assignments

COURSEWORK ONE: BUSINESS PLANNING

COURSEWORK TWO: MANUFACTURING

Specimen Paper Module 6

Sweeting & Lea Ltd

Briefing Paper to All Employees of Sweeting & Lea Ltd

Usage Chart Stocks of Wood: Financial Year 1996

Expenditure in Year 1997 250 Expenditure in Year 1997 400

Net Cash Flow Net Cash Flow

Year 1998 90 Year 1998 60

Year 1999 80 Year 1999 80

Year 2000 80 Year 2000 120